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Declining oil prices threaten the Gulf states budget
On: Wednesday 23/05/2012 19:51
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Citizen - Follow-up
Perhaps breathing consumers a sigh of relief following the sharp decline in oil prices in recent weeks, but the decline for Gulf governments was like to remind its adoption by increasing the survival rates of energy at their historical high. In the midst of the increase in domestic spending that led to the rise of income that you need Gulf countries to finance their balance sheets, the energy-rich countries are more vulnerable to fluctuations taking place in the oil markets. As some say, the end of days surplus budgets public is no longer something that can not be predicted, according to the newspaper Kuwait Times. Says Farouk Sousse, chief economist at Citigroup in Dubai: The total comes to the degree of willingness of those countries to cope with deficits in public budgets and to what degree it can assume that the deficit in their budgets. While there is still oil prices high, according to historical standards, but the market fears of a slowdown in China, and the possible exit of Greece from the euro zone, the crack in the economic recovery in the United States, which revealed all the vulnerabilities and potential vulnerabilities in the current era of high oil prices, which depend on the budgets of the Gulf countries. has fallen, according to the report of the Financial Times price of a barrel «West Texas» standard in the United States to its lowest level in six months at $ 92, last week. At the same time, ended the Brent crude, which is used as a measure of Middle East oil, the biggest decline in three weeks since last May, falling by more than $ 20, registered less than $ 110 a barrel, its lowest level during the year. In the recent past, the mean prices Crude within that range financial surpluses huge for the region, but increased spending changed that situation, since it is expected that the government spending $ 500 billion by next year, an increase of four times in less than a decade, according to estimates of «HSBC C ». According to the International Monetary Fund, the UAE needs for the time being to remain price of a barrel of oil above $ 92, to keep its budget without a deficit, compared with $ 23 only in 2008. In the Gulf, only Bahrain need to price levels higher than that. In the wake of political turmoil the country has witnessed, and hurt the tourism and financial sectors, the price of a tie for the general budget last year to $ 114 a barrel, according to IMF estimates. Even Saudi Arabia, the giant region's economic, the price of a barrel of oil required to avert a deficit balance sheet to $ 80 a barrel, more than double the level required in 2008. And prices can draw, which is difficult to quantify for the States, which are often government budgets vague not transparent, that vary widely from source to source. But it shows how spending rose in conjunction with the high oil prices, and observers doubted whether it could be back this spending that easy.
Says Robin Mills, an analyst at Mannar Consulting, based in Dubai: It's very dangerous to build an economy based on this type of high oil prices. In the short term found all kinds of threats that could push oil prices to decline, and in the long run, the $ 100 a barrel price is not Palmstdam. While all the Gulf oil exporters have become more vulnerable to oil price shocks, but some of them in a better position than others to cope with the turbulence, according to observers. Saudi Arabia, which has the largest populations in the Gulf region, will continue spending on social programs, economic development, regardless of the risk of a shortfall in the budget, because it can not delay addressing issues and local problems, such as unemployment and disparities in wealth, according to Suse. And Saudi Arabia has sufficient flexibility to fund the deficit in Almizaana may be exposed to him over the medium term thanks to a strong financial reserves of $ 500 billion. The changed structure of government spending across the Gulf countries during the last five years, and ranged between dealing with the repercussions of the global economic crisis and the new focus on the soothing and calming fears and unrest. While constituted state aid and wage increases is one of the methods used early for that spending, the bulk of it will go to infrastructure projects to address what he considers the root causes of many disorders, such as unemployment, housing and state services.
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